Federal Court confirms that it will not set aside default judgment lightly

January 4, 2011

A recent decision of the Federal Court emphasizes that defendants bear a significant burden in setting aside default judgments that arise because the  defendant has simply failed to file a statement of defence within the allotted period of time.

In Molson Canada 2005 (An Ontario General Partnership) and Coors Brewing Company v. Drake J. Beachamp, the defendant was the owner and operator of a leather retail business, selling purses, belts, belt buckles and wallets from kiosks at shopping malls and special events.  Molson commenced an action against the defendant, claiming that he sold counterfeit product bearing its unauthorized trademark.  The defendant failed to file a statement of defence, and default judgment was accordingly granted against him.  The judgment ordered the defendant to deliver up all counterfeit goods, and also ordered that general damages, punitive damages, and costs be paid to Molson.

The defendant subsequently brought a motion to set aside the default judgment.  The Federal Court found that the defendant was required to satisfy the established tri-partite test that: 

  1. He had a reasonable explanation for his failure to file a Statement of Defence;
  2. He had a prima facie defence on the merits to the claim; and
  3. He moved promptly to set aside the Default Judgment.

As to the first prong of the test, the defendant asserted that his father suffers from a psychological disability, and tore up the statement of claim before he had a chance to read it.  The Court, however, did not accept this argument, finding that the document could not have been shredded to the point where the defendant could not determine what it was.  Instead, the defendant’s previous failure to respond to cease and desist letters was evidence of wilful blindness, not the “comedy of errors” as was submitted by counsel.  It was only when the defendant’s goods were seized that the seriousness of the situation required him to respond by bringing the motion to set aside default judgment.

As to the second prong of the test, the defendant merely asserted that the trademarked goods were, to the best of his knowledge, not counterfeits.  The defendant failed to offer any evidence to show that this defence had merit, such as an affidavit from a supplier attesting that the goods were manufactured under license.  As a result, the defendant’s bare assertion did not even meet the low threshold for showing that a prima facie defence was available.

Although the Court was prepared to accept that the defendant met the third prong of the test by moving promptly when his goods were seized, because the defendant did not satisfy the Court as to each aspect of the test for setting aside default judgment, the defendant’s motion was dismissed and default judgment upheld.

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